US embassy cable - 05ACCRA658

C O N F I D E N T I A L SECTION 01 OF 06 ACCRA 000658 
 
SIPDIS 
 
CDR USEUCOM FOR GEN WALD/POLAD SNELL FROM AMBASSADOR YATES 
TREASURY FOR ALEX SEVERENS 
USTDA FOR BRYCE TERNET 
MILLENNIUM CHALLENGE CORP. FOR ROD NORMAN 
 
E.O. 12958: DECL: 03/30/2015 
TAGS: EAID, ECON, EFIN, GH, KMCA, PGOV, PHUM, PREL, EINV 
SUBJECT: GHANA'S PRIORITIES AND CHALLENGES IN THE NEXT FOUR 
YEARS 
 
REF: ACCRA 2307 
 
Classified By: Ambassador Mary C. Yates for reasons 1.5 d and e. 
 
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Summary 
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1.  (C)  Post,s view of Ghana,s prospects over the next 
four years follows, and is in part based on the President's 
hour-long tour d'horizon with the Ambassador on March 9 and 
post-election conversations between Emboffs and key Ghanaian 
players.  The political challenges ahead include increases in 
violent crime and ethnic/religious tensions, especially in 
the north, which the president underscored.  Partisan 
political tensions will require careful management, as will 
neighboring regional conflicts. 
 
2.  (C)   We expect broad continuity in President Kufuor's 
second term, with a greater focus on the economy.  This is 
evident in the three biggest decisions to date of his second 
term:  the deregulation of petroleum prices, his budget 
priorities, and some of his choices for key positions. 
Corruption remains the opposition NDC's rallying cry against 
the NPP and the President needs to move decisively against 
corruption if Ghana is to attract the foreign investment 
necessary for economic growth. 
 
3.  (C)  Over the longer term, Ghana must boost economic 
growth to keep pace with a growing population and meet the 
aspirations of a population increasingly active politically. 
Ghana also needs to strengthen democratic institutions and to 
move from a dependency mentality to greater self-sufficiency. 
 The USG will continue to play an important role through both 
civilian and military engagement. After decades of military 
dictatorship and economic decline, there is reason for 
optimism about Ghana's future.  End summary. 
 
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Kufuor Two:  The Government Sets Themes 
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4.  (U)  During President Kufuor's second term, he will try 
to consolidate the gains of his first four years by 
translating macroeconomic success into poverty reduction for 
the masses.  In his meeting with the Ambassador, the 
President prioritized improving education, health care, 
infrastructure and private sector development as his biggest 
challenges. 
 
5.  (U)  These themes were reflected in President Kufuor's 
February 3 State of the Nation address.  The speech was 
largely a repackaging of the five priorities of his first 
term, but was focused, sensible and devoid of the partisan 
rancor of past State of the Nation addresses.  Kufuor 
highlighted three priorities: 1) human resource development, 
2) private sector development, and 3) a continued emphasis on 
good governance. 
 
6.  (U)  On human resource development, he proposed some 
minor changes to the education system, stressed IT 
development, and committed to teacher training.  For private 
sector development, he called for the creation of a new 
department in the Private Sector Development Ministry to 
promote the information business sector specifically. He also 
called for facilitated business financing, modernizing 
agriculture, and continued financial sector discipline.  On 
good governance, Kufuor affirmed it as "the guiding principle 
which has underpinned all policies of this government."  He 
highlighted past achievements:  passage of Right to 
Information and Whistle Blower bills, initiation of a 
National Policy on Gender and Children, the creation of 28 
new District Assemblies, and ongoing efforts to strengthen 
the police force. 
 
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Political Challenges 
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7.  (C)  Ethnic/religious tensions:  President Kufuor 
privately spoke of his deep concerns over the increasing 
"ethnic/religious" tensions, especially in the north 
(reftel).  He associated growing "gangster and criminal" 
activities, especially in Kumasi, with an increasingly 
conservative Muslim population.  He also alleged a "hidden 
hand" was orchestrating growing tension, and growing Muslim 
opposition to the NPP, alternately accusing foreign forces 
and/or former President Rawlings.  He said that the NPP had 
lost in all the "zongos" (Muslim "ghettos") during the 
December election. From Accra to Kumasi and farther north, 
Muslims had listened to their Imams' encouragement to vote 
against the NPP.  Later the President cited the growing 
influence of Iran in Ghana, especially in its successful 
outreach in building new mosques and health clinics. 
 
8.  (C)  Kufuor explained that the upcoming April by-election 
near Kumasi would test the ethnic tensions and that the NPP 
was extremely worried about the results.  Initially the NPP 
was running a respected female candidate, but retracted her 
candidacy after local Imams preached against her because she 
was a woman.  Kufuor countered by recalling his Ambassador to 
Guinea, a Muslim from Kumasi, to represent the NPP in the 
election. Kufuor also lamented that most Muslims fail to give 
him and the NPP credit for the historic move of choosing a 
Muslim vice president.  He said the Muslims did not seem to 
recognize the government's efforts to improve living 
standards in Muslim areas, pointing out that people in the 
north already receive free schooling.  He expressed 
disappointment that the community's receptivity during his 
frequent campaign trips to the north, especially in the 
troubled Dagbon area, had not translated into votes.  The 
President came close to accusing President Rawlings of the 
Dagbon Ya-Na's March 2002 assassination.  (Note:  During the 
second NDC demonstration against petroleum increase on March 
17, President Rawlings suggested that Kufuor's government had 
a hand in the Ya-Na's killing.  End note.)  The Ambassador 
made the point that the inflammation and politicization of 
this northern ethnic problem in Ghana must be watched 
carefully, and pointed out problematic regional north/south 
trends from Cote d'Ivoire to Nigeria.  (Comment:  The 
north/south divide in Ghana is real, as are ethnic tensions 
in the north.  However, we were surprised by the President's 
view of Muslims.  Muslims vote overwhelmingly NDC because the 
NDC did a better job at courting them when they were in power 
than the NPP has since 2000.  Muslims are frustrated by the 
small number of Muslims in Kufuor's Cabinet.  Muslims also 
associate the NPP with the expulsion from Ghana of Muslims in 
1969-71, under former President Busia.  While there are small 
radical elements in the Muslim community, Muslim-Christian 
relations are generally good in Ghana.  Kufuor's link of 
Muslims to a Rawlings or foreign plot is farfetched, but 
reflects the deep distrust between Kufuor and Rawlings.  End 
Comment.) 
 
9.  (C)  Managing Political Acrimony:  Despite a very 
successful December 2004 democratic election, post-election 
partisan enmity has grown in the first few months of Kufuor 
II.  The close election results (NPP 52.4% to NDC 44.6%) and 
poor showing of other small parties revealed a country 
divided.  The NPP generally did well among urban, wealthier, 
more literate, more industrial and ethnically Akan voters, 
especially in the south, center and west.  The NDC by 
contrast was strong among rural, lower income, less literate, 
Muslim and non-Akan voters, especially in the north and east. 
 Neither major party gave significant prominence nor 
recognition to the growing youth population.  Top NPP and NDC 
officials voice strong dislike for and suspicions of each 
other.  Rawlings and Kufuor (as well as the NPP leadership) 
have exchanged sharp verbal attacks over the past few weeks, 
prompting some renewed public outcry for reconciliation 
between the two leaders in the interest of national 
stability, including a call for mediation by the National 
House of Chiefs. 
 
10.  (C)  The NPP markedly improved its position in 
parliament and has assertively thrown its weight around, with 
support from the smaller opposition parties.  The NDC has 
sought opportunities in parliament to embarrass the 
government.  After an NDC walk-out during the selection of 
parliamentary leaders, the NPP got its way on all three top 
leadership positions, completely shutting out the NDC.  The 
heightened intra-party tension is polarizing parliament, 
alienating some within the NPP, and sowing the seeds for 
possible delays in important legislation and more rancorous 
inter-party conflicts in the coming months. 
 
11.  (C)  Keeping the Neighborhood Safe:  Ghana will continue 
to work to guard against spillovers from regional conflicts, 
but it will be difficult for Ghana to avoid all consequences 
from the crises in Cote d,Ivoire on its western border and 
Togo to the east.  In his State of the Nation address, Kufuor 
said the GOG would maintain a policy of "good neighborliness" 
in ECOWAS and Africa, while "strategic geopolitics" will 
prevail in the rest of the world.  This will likely mean 
strong continued engagement in ECOWAS (and for African Union 
initiatives) and support for regional efforts, as well as 
encouraging political reform in Cote d,Ivoire and Togo while 
not destabilizing or alienating either.  Ghana may apply 
pressure behind the scenes, but in public it lets others lead 
(Thambo Mbeki in Cote d'Ivoire and ECOWAS in Togo.)  Ghana's 
cautious pragmatism stems from its inability to effectively 
control its borders. Its 8,000 man military is overextended 
in peacekeeping operations and it lacks the means to capably 
man its borders for interdiction of narcotics, illegal 
weapons, or smuggling of goods and people.  Ghana's 
civilian/diplomatic bureaucracy, including its Foreign 
Affairs Ministry, is also poorly staffed and not empowered to 
make decisions. 
 
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Economic Challenges 
------------------- 
 
12.  (U)  Petroleum Price Hike:  On February 20, the GOG 
increased the price of petroleum products, including a 50 
percent jump in gas prices, and began to shift pricing to the 
new private-public National Petroleum Tender Board (reftel.) 
The GOG had postponed the price rise, which partially 
fulfills an IMF and World Bank commitment under HIPC, until 
after the election.  Its decision to go ahead with it 
reflected a desire to continue with difficult economic 
reforms while taking advantage of a political honeymoon 
period.  (However, in response to intense local opposition to 
price increases, the GOG subsequently decided to delay full 
implementation of petroleum deregulation, as required by the 
IMF.) 
 
13.  (U)  The Budget:  Citing the President's three 
priorities, Finance Minister Wiredu's February 24 budget 
raised the minimum wage, reduced the corporate tax rate by 
around 4 percent, and cut two other taxes by 2.5 percent. 
These tax cuts were bigger than expected, and should 
encourage savings and investment by those companies which 
actually file taxes. 
 
14.  (C)  Appointments:  Kufuor's appointments have stressed 
personal chemistry, continuity and, in may cases, basic 
competence.  Among the (excessive in our view) 88 ministerial 
and deputy ministerial appointments, there were some 
surprises, most notably switching the Ministers of Finance 
and Education.  The new Finance Minster, an accountant by 
education, has already demonstrated he intends to be deeply 
involved in and demanding of his ministry, by making helpful 
MCA preparation interventions.  Kufuor also replaced several 
other key economic policy makers including the Ministers of 
Agriculture and Energy.  The President confided to the 
Ambassador when discussing troubling FAA issues that the 
airport/airline portfolio had shifted from the Ministry of 
Transport to the Presidency under his watchful eye.  Overall, 
the appointments do not appear to be especially impressive, 
nor are they merely political choices.  It is too early to 
reach a considered judgment but our initial impressions are 
middle of the road, at best. 
 
15.  (C)  Stemming Corruption:  The Kufuor administration has 
a mixed record on corruption.  While his "good governance" 
priority is encouraging, President Kufuor has not offered (or 
implemented) new ideas on how to diminish endemic corruption. 
 The President stuck by three ministerial nominees whose 
vetting was held up because of alleged corruption (although 
he said their ordeal and the allegations caused him 
"anguish").  Parliament then announced it did not have the 
means to investigate corruption allegations against the 
nominees.  Kufuor stays loyal to some other top officials who 
are longtime allies but known to be corrupt.  In his second 
term, Kufuor may have an even more difficult time containing 
corrupt NPP politicians, as some may seek to feed at the 
trough before it is taken away, which may hurt the NPP in the 
2008 elections. The NDC,s primary 2004 election platform 
plank was NPP corruption, and it has already re-surfaced as a 
major issue in Parliament. 
 
16.  (SBU)  Improving the Investment Climate:  The Kufuor 
government has not put in place sufficiently 
investment-friendly procedures or policies.  While the 
rhetoric is pro-market, the reality is often protectionist 
and statist, reflecting Ghana's socialist legacy.  Foreign 
and domestic investors find that the GOG has difficulty 
making decisions and frequently lacks transparency in 
decisionmaking.  Cote d,Ivoire,s continuing unrest, coupled 
with the high price of cocoa, bring trade and hard currency 
opportunities to Ghana.  But there is also an increase in 
Nigerian businesses, which import their style of corruption. 
The largest impediment to serious foreign investment remains 
the land tenure issue.  As long as the Ghana,s traditional 
chiefs remain the major land holders, modern Ghana cannot 
progress and economic growth can not take off as quickly as 
it should.  The GOG's recent backtracking on further 
petroleum price increases and its cautious, bureaucratic 
approach to the MCA are examples of inconsistent and 
sometimes timid decisionmaking. 
 
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Implications for the United States 
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17.  (C)  Ghana will remain a strong partner for the United 
States across the full range of our Mission Program Plan 
goals, and we should take advantage of the political window 
offered by the first year of Kufuor's second term to further 
our objectives.  The recent in-depth conversation between the 
President and Ambassador offered a good start and exchange on 
a number of these issues. 
 
-- Building on growing concerns over north/south ethnic and 
religious tensions, post will continue to implement MPP goals 
through our Muslim outreach programs, and targeted USAID, 
Self Help, military humanitarian assistance and State 
Partnership Program (SPP) programs in the north.  We believe 
we are making a real difference in public attitudes toward 
the U.S. and some gains in development and improved health. 
 
-- This is an important time to strengthen Ghana's democratic 
institutions and law enforcement capabilities and reinforce 
anti-corruption messages.  The Parliament has made great 
democratic strides, but the judiciary needs more reform and 
support.  We are continuing our police and security training, 
and will make certain the GOG does not lose sight of the 
genuine requirements and responsibilities of a functioning 
democracy. 
 
-- Our assistance to economic growth should include rapid 
conclusion of the MCA compact with Ghana.  It is a win/win 
because of the focus on agribusiness and the significance of 
assisting with infrastructure development in a stable 
democracy in troubled West Africa.  Infrastructure was cited 
several times by President Kufuor as one of his government's 
most urgent challenges to economic growth. 
 
-- This first year of Kufuor II is important for supporting 
economic reforms, especially as they affect improving the 
investment climate and poverty reduction.  President Kufuor 
may attend the Corporate Council for Africa conference in 
Baltimore in June and will likely attend the Glen Eagles G-8 
meetings, offering opportunities for senior USG engagement on 
economic issues. The necessity for continued economic 
openness and for economic rule of law must be constantly 
reiterated. 
 
-- We should look for ways to support President Kufuor's 
commitment to enhance human resource development through 
educational and IT opportunities and programs which stimulate 
the return of diaspora talents and resources from the U.S. 
-- We need to continue to work to consolidate and enhance 
Ghana's regional leadership role as a peacemaker and 
peacekeeper.  Post will continue to recognize the 
professionalism of Ghana's military, which is heavily engaged 
in peacekeeping, through military-to-military programs, 
including the placement of a U.S. military officer at the 
Kofi Annan Center.  The beginnings of our SPP with the North 
Dakota National Guard appear very positive at the moment. 
Further dialogue on the Gulf of Guinea initiative by U.S. 
military senior representatives will reinforce growing USG 
interest in the region. 
 
-- An invitation to President Kufuor to join a small group of 
democratic African leaders in a meeting with President Bush 
(possibly to coincide with CCA Baltimore conference timing) 
would provide positive reinforcement for Ghana's 
accomplishments. 
 
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Comment 
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18.  (C)  President Kufuor is off to a reasonably strong 
start in his second term.  He moved forward with petroleum 
deregulation and a solid budget, and has set out clear 
priorities.  His team is experienced, although he missed an 
opportunity to reduce the size of his bureaucracy and replace 
some poor performers.  The opposition is acting responsibly 
and Kufuor's style is methodical and steady rather than 
innovative or bold.  We do not expect major surprises in the 
next year.  President Kufuor has about one year before the 
jockeying for succession within his party heats up in a way 
which could substantially distract from policy making  Backed 
by a recent election victory and his party's improved 
strength in parliament, the central question will be how 
effectively Kufuor uses this year to push forward with 
economic reform.  However, the pace and success of this 
effort will depend in large measure on his ability to manage 
growing north-south tensions, assuage intra- and inter-party 
friction, broaden his ethnic appeal, contain corruption, and 
insulate Ghana from the spillover of regional conflicts. 
Former President Nkrumah may have forged a national 
consciousness at Independence that transcended ethnic 
considerations, but it may take Kufuor,s coalition-building 
leadership to continue to keep the Ghanaian fabric together 
as 2008 approaches. 
 
19.  (C)  Kufuor's second term will have a significant impact 
on Ghana's longer term outlook.  When Ghanaians are asked 
about the future, they typically look to the past and remark 
on how far Ghana has come over the past twenty years, 
especially in transitioning from military dictatorship to 
democracy. A majority genuinely like Kufuor and believe they 
are better off now than they were under Rawlings. Political 
leaders are risk averse and focused on the short term, with 
little sense of vision for the next decades.  Over the longer 
term, Ghana needs to make significant progress in economic 
development.  It desperately needs to diversify its economy 
to reduce its current vulnerability to cocoa and gold price 
shocks.  It needs to boost investment to create jobs for its 
youthful population (50% of Ghanaians are under age 18 and 
the population is predicted to increase by 50 percent by 
2025). Ghana needs to accelerate beyond a 4-5 percent growth 
path, which will require improvements in infrastructure and 
the investment climate.  The main political challenge of the 
next decade will be consolidating democracy and forging a 
stronger sense of national unity. Some of this may take 
constitutional change -- for example, selecting local 
District Chief Executives through elections rather than by 
appointment and reducing the percentage of ministers who are 
also members of parliament.  With economic and political 
development, Ghana can move from an entrenched dependency 
paradigm, and the international community can shift from a 
predominantly aid/debt relief relationship increasingly to a 
partnership based on trade and Ghanaian leadership in the 
world community.  None of this is inevitable but in Ghana, 
more than in many African countries, there is good reason for 
optimism. 
 
 
LANIER